Blog Entries by Christopher E. Winn, Managing Principal, AdvisorAssist

2012 Resolution - Become the "Trusted Advisor"!

As 2011 comes to a close, it is time to plan the goals for your advisory firm for 2012 and beyond.

What are the New Year’s Resolutions for your firm?

Hopefully, topping your list is a strategic plan to deepen your client relationships and truly position yourself as the “Trusted Advisor” for your clients. Earning this trust requires more than strong relationship management. It requires continual increases in value and service.

In these times of volatility and uncertainty, clients are turning to their trusted advisors seeking risk management and guidance regarding all aspects of their financial situations. You can meet (and even exceed) client expectations by incorporating a holistic view of a client’s financial picture into your advice model.

Including accounts that are “held-away” from primary managed accounts is a high impact way to deepen these relationships, enhance risk management and even increase your fee revenue.

To help jump start your 2012 planning with Held-Away Accounts, this post focuses on the Steps to Getting Started with Held Away Accounts and the Compliance and Operations Considerations.

5 Steps to Getting Started with Held-Away Accounts
Implementing any business change requires careful planning. Developing a road map to implementation is critical. Some of the key steps are below:

Step 1 - Develop a strategic plan. While it is easy to visualize the increased client value and the revenue enhancements, a business model change does require planning. Sorry, no real way around this!

It is important to convey how the inclusion of held-away accounts will impact your firm, your value proposition, your positioning and client perception. What level of service will you provide on held-away accounts? What will you charge for these advisory services? Options can range from inclusion in reporting through active management. Determine the approach and the ROI for your business model.

Step 2 - Develop an action plan.  An action plan should be realistic and measurable. Include a structured timeline, the internal and external resources to support your efforts, and the approach for client roll-out. For example, will you stagger the implementation of existing clients over a measured period? How will you communicate to clients? Have you selected technology or engaged consulting partners to support your plans?

Step 3 - Identify Technology Solution(s). Review and select an Account Aggregation Solution and any partners that will help you implement your vision. Seek solutions that integrate or communicate with your existing technology selections. A disjointed technology solution can often be more costly than a completely manual solution.

Step 4 - Operations and Compliance. In preparation for the new business processes, you will need to address the operational workflows and compliance considerations. Client agreements will need to be revised to obtain the requisite authority. Safeguards must be put in place to ensure you are not assuming custody of client accounts. Additional details are listed below.  

Step 5 - Pilot your Roll-out. You may be eager to expedite the roll-out, given the enhanced client value and increased revenue. Resist the urge to roll out your plans all at once. Select a smaller group of clients that represent the segments of your client base.

6 Key Compliance and Operations Considerations
Now that you have a plan in place, it is time to make sure you did not overlook compliance and operations.

1. Custody. One of the major compliance considerations is the “Custody Rule”. Leverage technologies and good process controls to avoid increased regulatory risk and costs. If you have access to client cash and securities or the ability to change account information, you have custody and are subject to surprise audits, financial requirements and other compliance risks. Aggregation technology is essential to prevent assuming custody resulting from held-away accounts.

2. Client Agreements. Your client agreement must fully and accurately reflect your level of authority, your responsibilities, accounts included in advisory services and how you will bill your services. Consult your compliance partners on this topic to ensure you cover all key matters, such as: 1) authority to access accounts; 2) authority and location for billing of accounts; 3) calculation methodologies, including timing and valuation of securities; 4) limitations of authority or liability; and 5) safeguards to prevent custody.

3. Disclosures. To prepare for the inclusion of held-away accounts, you will need to ensure that your disclosure documents, such as your Form ADV 1, ADV2A and other documents provided to clients, accurately reflect your new business practices. And don’t forget to review your Privacy Policy to ensure you have the authority to access and share client information.

4. Books and Records. Advisors are required to keep all books and records relating to the advisory business for at least 5 years. Account and transaction data for held-away accounts must be retained along with other records. Performance used in reporting and advertising must be retained as well as all client correspondence.

5. Compliance Program and Operational Manuals. Update your compliance manual, operational checklists and other process tools to reflect your new business practices. Remember of course that the versions of these documents are also required books and records items and must be maintained for at least 5 years.

6. Compliance Training. Ensure your team (and your clients) understand how held-away accounts are implemented into your advice model. What are the roles and responsibilities? What information or reporting will you provide to clients? What are the limitations? Ensure the client does not make incorrect assumptions on the level of service you are providing.

Happy New Year and good luck growing your business on 2012!

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